June 6, 2019 / 11:19 AM / 3 months ago

Banks offload Iberconsa LBO loan at deep discounts

LONDON, June 6 (LPC) - Banks have sold a €300m term loan backing Platinum Equity’s acquisition of a majority stake in Spain’s frozen fish producer Iberconsa at a huge discount, implying losses for the underwriters, banking sources said.

Bank of America Merrill Lynch and Santander, alongside Morgan Stanley led the financing, which was eventually sold to a number of investors at 700bp over Euribor, at 87% of face value.

In mid-May traditional credit investors were being shown the deal at 600bp over Euribor, at 98 OID.

Platinum was not immediately available to comment.

While sponsors and banks have pre-agreed levels of flex that vary on a deal-by-deal basis, it is likely that even in the event of very generous flex terms, the banks will be out of the money at the levels offered on Iberconsa.

Platinum is a ‘special sponsor’ of BAML, sources said, adding the bank would have done this as a favour to them.

“Even 600 at 98 was most probably not the starting point to sell this deal. At 87 the banks are taking a hit,” a loan syndication head said.

An investor added: “87?! Ouch.”

The loan ended up selling to a number of funds, including direct lenders, which is not a traditional pool of investors for syndicating banks to approach. Direct lending funds are however more open to taking on riskier, higher yielding paper.

Direct lenders have a lot of money to put to work and at this price, the loan was oversubscribed and funds were scaled back, a banking source said.

The loan proved a hard sell given the sector and the jurisdictions Iberconsa has exposures to, including Argentina, Namibia and South Africa.

It has risk due to the underlying commodity, fish and price volatility. The company has sales in euros to Spanish suppliers, while its costs are in dollars for the workforce. The fishing rights are in Argentina and Namibia and are subject to government risk, a second investor said.

Founded in 1981, Iberconsa has growth both in its commercial and shipowning activity, which began in 1998. It now comprises more than 20 companies operating in the frozen fish industry, in processing, manufacturing, wholesale and retail marketing, cold storage and distribution, according to its website. (Editing by Christopher Mangham)

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